As reported by the Australian Financial Review, the asset, with over 340,000 sq ft of retail space, is reportedly valued at over $1 billion.
Less than two months ago, Lendlease REIT announced the divestment of another asset, the JEM office for $462 million, to Keppel. This sale will be completed by the end of 2025.
Assuming proceeds are fully used to reduce debt, the REIT's gearing will be lowered to 35% from 42.6% now. This means the REIT will then have the debt capacity to fuel its growth ambitions.
PLQ is long known to be in the right of first refusal pipeline for Lendlease REIT and the mall has entered its second renewal cycle and thus deemed stabilised.
"While timing of an acquisition could be early, the opportunity to acquire a quality mall could be too good to pass, especially when the current low interest rates, with SORA at around 1.45%, is an enabler for an accretive deal to happen," says DBS.
Assuming a net property income yield of 4.5%, based on asset value of $800 million (70% stake), DBS estimates that a deal structured with half equity and half debt will pass the DPU hurdle to acquire Adia’s 70% stake in the asset, while holding its gearing at below 40%.
"In our view, assuming the acquisition, PLQ will be overall positive for Lendlease REIT with the addition of one of the newest and best-built malls in the East of Singapore, anchoring it as an emerging pure-play retail S-REIT," says DBS.
As at 9.11 am, Lendlease REIT units changed hands at 62 cents, unchanged thus far today but up 9.82% year to date.
